Motley Fool Stock Advisor
recommendation and portable storage container maker Mobile Mini
Well, that's what Mini called it. To me, the deal to "merge" with privately held rival Mobile Storage (majority-owned by private-equity house Welsh, Carson, Anderson & Stowe) looks more like a takeover. For one thing, according to the terms of the press release, Mini will pay $12.5 million cash, assume $535 million in debt, and issue $154 million worth of preferred stock (8.55 million shares, with a conversion price of $18 per share) to gain control over Mobile Storage. For another, although Mobile Storage's CEO will get a job at the new "merged" entity, the top spots continue to be occupied by Mini management -- Steve Bunger at the helm as CEO, seconded by Larry Trachtenberg as CFO.
Pause. Now breathe.
Before getting into the valuation on this deal, I want to make two observations that may cheer the hearts of Stock Advisor subscribin' Fools, since we recommended this stock to you last year. First, let's look at the $18 implied valuation on the shares. In an arm's-length transaction like this one, the sellers' agreeing to this price suggests that Mini's shares are trading below intrinsic value. Second, at least one of the sellers here -- namely Welsh, Carson -- "will be converting substantially all of their equity ownership of Mobile Storage group into Mobile Mini preferred stock," a move that suggests Welsh, Carson thinks Mini is worth far more and plans to hold on to its shares until they reach that fair value. In theory, Welsh, Carson could as easily have demanded cash payment and invested it in another storage company, such as Public Storage
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